Technical Market Report

The good news is:
• While the market was down last week, there was no increase in the number
of new lows.

Short Term

Short term, the market is overbought.

The chart below covers the past 6 months showing the NASDAQ composite (OTC)
in blue and an indicator showing the percentage out of the last 3 trading days
that the NASDAQ AD line has been up (OTC ADL %UP) in orange. Dashed vertical
lines have been drawn on the 1st trading day of each month.

As of Friday's close the OTC ADL has been up for 3 consecutive days, something
it has done 5 other times since the early March low. In 3 of the 5 occurrences
the OTC ADL went up for 1 more day prior to a short term reversal. The other
2 times the market reversed after the 3rd up day.

Next Monday and/or Tuesday are likely to be down.

Intermediate term

The next chart covers the past 6 months showing the OTC in blue and an indicator
showing a 40% trend (4day EMA) of the ratio of NASDAQ new highs to new lows.
Dashed horizontal lines have been drawn at 10% levels for the indicator; the
line is solid at the 50% level. The indicator turned upward Thursday after
falling sharply in the earlier part of the week. Nothing really bad is likely
to happen as long as the indicator is above the 50% level.

Seasonality

Next week includes the week prior to the 4th Friday of June during the 1st
year of the Presidential Cycle.

The tables show the daily return on a percentage basis for the week prior
to the 4th Friday of June during the 1st year of the Presidential Cycle. OTC
data covers the period from 1963 - 2008 and SPX data from 1953 - 2008. Prior
to 1953 the market traded 6 days a week so that data has been ignored. There
are summaries for both the 1st year of the Presidential Cycle and all years
combined.

Monday, the day following future and options expiration, has been a consistently
bad day. Otherwise, the SPX has been modestly positive during the 1st year
of the Presidential Cycle, while returns have been modestly negative by all
other measures.

Report for the week before the 4th Friday of June.
The number following the year is the position in the presidential cycle.
Daily returns from Monday through the 4th Friday.

OTC Presidential Year 1

Year

Mon

Tue

Wed

Thur

Fri

Totals

1965-1

-0.50%

-0.11%

-0.11%

-0.78%

-1.51%

-3.01%

1969-1

-0.66%

0.09%

-0.03%

0.09%

0.23%

-0.29%

1973-1

-1.46%

0.19%

-0.76%

0.21%

0.59%

-1.23%

1977-1

0.11%

0.11%

-0.05%

0.39%

0.49%

1.06%

1981-1

-0.44%

0.29%

-0.21%

0.25%

0.21%

0.09%

1985-1

0.44%

0.80%

0.38%

0.66%

0.29%

2.57%

Avg

-0.40%

0.30%

-0.14%

0.32%

0.36%

0.44%

1989-1

-0.25%

-0.34%

-0.16%

0.33%

0.68%

0.26%

1993-1

-0.12%

-0.29%

-0.29%

0.57%

0.88%

0.76%

1997-1

-0.88%

1.26%

-0.43%

-0.68%

0.13%

-0.60%

2001-1

-1.96%

0.21%

1.93%

1.36%

-1.17%

0.37%

2005-1

-0.09%

0.14%

0.05%

-1.02%

-0.84%

-1.77%

Avg

-0.66%

0.20%

0.22%

0.11%

-0.06%

-0.20%

OTC summary for Presidential Year 1 1965 - 2005

Avg

-0.53%

0.21%

0.03%

0.13%

0.00%

-0.16%

Win%

18%

73%

27%

73%

73%

55%

OTC summary for all years 1963 - 2008

Avg

-0.10%

0.02%

0.10%

-0.09%

-0.12%

-0.20%

Win%

40%

62%

52%

60%

51%

49%

SPX Presidential Year 1

Year

Mon

Tue

Wed

Thur

Fri

Totals

1953-1

0.50%

0.67%

-0.12%

0.42%

0.08%

1.54%

1957-1

-0.78%

0.79%

-0.13%

0.36%

0.23%

0.47%

1961-1

-0.92%

0.88%

-0.02%

-0.37%

0.40%

-0.02%

1965-1

-0.34%

0.19%

-0.63%

-1.31%

-0.60%

-2.69%

1969-1

-0.46%

1.13%

-0.32%

0.25%

0.08%

0.69%

1973-1

-1.43%

0.38%

0.43%

-1.18%

0.47%

-1.32%

1977-1

0.45%

0.32%

-0.28%

0.16%

0.57%

1.22%

1981-1

-0.24%

1.06%

-0.52%

0.11%

-0.19%

0.23%

1985-1

-0.24%

0.31%

0.17%

0.62%

0.32%

1.18%

Avg

-0.38%

0.64%

-0.10%

-0.01%

0.25%

0.40%

1989-1

0.17%

-0.20%

-0.24%

0.57%

1.76%

2.07%

1993-1

0.57%

-0.06%

-0.61%

0.77%

0.22%

0.89%

1997-1

-2.23%

2.02%

-0.82%

-0.60%

0.41%

-1.23%

2001-1

-0.49%

0.34%

0.87%

1.14%

-0.95%

0.92%

2005-1

-0.07%

-0.20%

0.02%

-1.08%

-0.76%

-2.10%

Avg

-0.41%

0.38%

-0.16%

0.16%

0.14%

0.11%

SPX summary for Presidential Year 1 1953 - 2005

Avg

-0.39%

0.54%

-0.16%

-0.01%

0.15%

0.13%

Win%

29%

79%

29%

64%

71%

64%

SPX summary for all years 1953 - 2008

Avg

-0.16%

0.13%

0.05%

-0.06%

-0.15%

-0.18%

Win%

39%

55%

54%

53%

43%

55%

Money supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth has
increased sharply over the past 2 weeks. That is usually a positive for the
market.

Conclusion

The market is oversold and seasonally it has done ok once it gets past the
Monday following options expiration.

I expect the major indices to be higher on Friday June 26 than they were on
Friday June 19.

This report is free to anyone who wants it, so please tell your friends. They
can sign up at: http://alphaim.net/signup.html.
If it is not for you, reply with REMOVE in the subject line.

Mike Burk independently publishes a weekly newsletter on the stock market from a technical perspective.

Charts and figures presented
herein are believed to be reliable but we cannot attest to their accuracy.
Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack
(fasttrack.net), Quotes Plus (qp2.com) and the Wall Street Journal (wsj.com).
Historical data is from Barron's and ISI price books. The views expressed are
provided for information purposes only and should not be construed in any way
as investment advice. Furthermore, the opinions expressed may change without
notice.